photo by noe

This is a topic that many have talked, written and argued about over the years.

Does money really make you happy?  If it does, can it buy you TRUE happiness?

Some people think that when they are rich, they will be happy.

It is true that it is nice to have money and it makes life a lot easier when you have it, but I don’t think it really makes you truely happy.

Below is a personal story from Tina, one of the most successful bloggers I know. She recently quit her job and started blogging full time. These are her thoughts on money and happiness.

I had a wonderful job at a phenomenal company. I had flexibility, an understanding boss, and a high paying salary. I loved my job. But after 6 years of expending myself on the job, trying out various professional roles, I felt that I’d grown beyond the fixed positions available at the company.

I’m not going lie, having a lot of money is nice. Money can buy you things, nice things. However, the cliché is true - money cannot buy you happiness, and having it doesn’t mean that you are a successful person. After several years, I realized that the more money I made, the less satisfied I became. Days started to blend into one another, time flew by, and I deeply longed for something with more meaning.

Upon realizing that I was trading my time for money, I started experimenting with various passive income sources. I’ve started and ended businesses, I’ve turned hobbies into professional pursuits, and I’ve tested out investment avenues.

In the end, I’ve learned that it doesn’t matter what you’re doing. As long as you are doing something that expresses your passion, you will excel and you will gain satisfaction. I’ve also learned that starting something from nothing and watching it grow is deeply rewarding.

Through my quest to finding my passion, I discovered blogging as a platform where I can share ideas and lessons learned that are closest to my heart, as a way to serve others. For the first time in my life, I feel that I am living my life purpose.

Words cannot express the joy I feel while writing for Think Simple Now, and the numerous times when feedback from readers has brought me to tears. This just feels right.”

I agree with Tina. It is important to find your passion in life and not rely on money to make you happy.

photo by Chris Gin

Taken with permission from The Simple Dollar
Written by Trent

One of the most common questions I get asked about retirement plans is whether or not a person should be putting their money into a 401(k) or a Roth IRA for retirement. The answer isn’t as straightforward as it might seem.

What Are The Options?

A 401(k) is a employer-sponsored deferred contribution retirement plan, so named because it’s defined under section 401(k) of the IRS code. In a nutshell, it works like this. You sign up for a 401(k) plan in your workplace and choose investment options within the plan. Your workplace takes money out of your paycheck before income taxes are taken out and deposits this in your plan. In some workplaces, your contributions are matched by the employer. Then, when you reach retirement age, you can take money out of the 401(k), but those withdrawals are subject to income tax - since you didn’t pay it earlier, you have to pay it later on. Currently, there is no upper income limit on who can contribute, but an individual can contribute at most $15,500 to his or her 401(k) in 2008 and the maximum amount that can be contributed total between employer and employee is $46,000 in 2008. You can find a lot more detail in the Wikipedia entry on 401(k)s.

A Roth IRA is an independent individual retirement account that you set up directly with an investment firm; it’s name comes from its chief legislative sponsor, Senator William Roth. With a Roth IRA, you set up an account with an investment house yourself (mine is with Vanguard), choose investment options with them, and then directly deposit after-tax money (from your checking account, for example) into the Roth IRA. Then, after meeting a few basic requirements (you’re 59 1/2 years old or older and have had the plan for five years or more), you can withdraw both your deposits and gains completely tax free. In 2008, the maximum contribution you can make is $5,000 a year (unless you’re over 50). There is one big caveat: there are income limits on who can contribute - if you make more than $99,000 individually or $156,000 jointly, you can’t contribute the full amount (and may not be able to contribute at all). You can find out a lot more detail in the Wikipedia entry on Roth IRAs.

What Are The Big Differences?

The big differences between the two are employer contributions, investment options/management, and taxes. Let’s look at each aspect.

Employer contributions
With a 401(k) retirement plan, an employer may match contributions made by an employee up to a certain percentage. For example, one 401(k) program I know of offers a 2:1 match for every dollar contributed to a 401(k) up to 5% of the salary. So, if you contribute 5% of your salary to your 401(k), the employer also puts in an extra 10% of your salary, effectively tripling your contribution. In short, if your employer offers matching contributions to your 401(k), that likely trumps any other concern and you should use a 401(k). It’s free money, after all - don’t turn it down.

Investment options/management
With a 401(k), you’re tied into whatever management and investment options are made available to you by the plan your company offers. That often means the investment choices are relatively weak. Things to look out for in your investment plans are expense ratios (if they’re high, that’s bad) and investment options (the more choices, the better). With a Roth IRA, you are allowed to choose your management and thus also your investment options - you pick the investing house you want to use. I chose Vanguard because the expenses they charge me are very low and they offer a huge number of index funds, my investment of choice. Roth IRAs offer an advantage in that they allow you to choose your plan’s manager, though if your 401(k) offers good options, this may not be a big advantage.

Taxes
This is really the sticky wicket out of the three because it involves some prediction of what the future holds for you. Here’s the deal: if you think your income tax rate will be higher at withdrawal time than it is now, a Roth IRA is a better choice and will save you money in the long run. If you think your income tax rate will be lower at withdrawal time than it is now, a 401(k) is a better choice and will save you money in the long run.

How can you know which rate will be higher? Here are a few things to ask yourself.

Will my income grow vastly between now and retirement? If the answer is yes, you’ll likely be in a higher tax bracket when you retire, which favors the Roth. If you’re near your peak, you’ll probably be in the same bracket or lower, which favors the 401(k).

Will I be working in my retirement years? If the answer is yes, you have a much higher chance of at least being in the same tax bracket you are now. If the answer is now, likely your income will be lower.

Will the political landscape shift towards higher tax rates? This one, honestly, is complete guesswork. If I had to guess, I would speculate that tax rates will go up in the future, and that favors the Roth IRA. If you think they’ll go down, that favors the 401(k).

Seem confusing, even overwhelming?
That’s because it is. It’s really hard to tell what will happen with the future and balancing different factors like that is hard. My personal opinion is that the Roth IRA has a slight edge in the tax department, but that’s mostly because I believe taxes are going to eventually go up.

So What Should I Do?

The first step, to me, is pretty easy. If your employer’s 401(k) plan has matching funds, always contribute up to the maximum amount that receives matching. This is free money, and enough of it that it trumps the other concerns. Get it while you can.

The question really revolves around what to do with additional retirement money. Given all the factors above, and also assuming you’re young and have many years of income growth ahead of you, I believe the best option is a Roth IRA - but they take a bit more work. You have to find your own investment plan with a Roth IRA and set it up yourself (it’s not that hard, but it does take a bit of time up front), but that gives you the freedom to find an investment house that matches your philosophy and saves you money (for me, that’s Vanguard).

If you’re older, near the peak of your income potential, and expect to have a smaller income in retirement, then more contributions to your 401(k) is probably your better choice.

No matter which path you decide to follow, simply by the act of putting money away you’re putting yourself ahead of the game. Don’t let this debate keep you from starting to save - if all else fails, simply start making contributions to one or the other now and then make up your mind later on - you can always change your contributions around later.

photo by mickeylieu

When I think of olympians, I think of the best of the best. The best track stars, the best gymnasts, the best swimmers (Michael Phelps), etc. To become the best it takes a lot of training, dedication and motivation.

Most people don’t see what these athletes experience behind the scenes to become olympians. They only see the result of what they’ve become.

This is true with investing. To become an “olympic” investment advisor, it takes a lot of training, dedication,  motivation, and years of experience. A person can invest in the stock market on their own, but usually they won’t get the “olympic” results they are looking for unless they put in an “olympic” type of effort. 

That’s why most investors who want “olympic” results hire a professional or an “olympic” advisor to manage their funds. It’s important to find someone who is capable of managing your funds to receive the best performance results. There are many advisors that you can trust and become friends with, but they may not be the best people to manage your life savings.

It is uncommon for an Registered Investment Advisor to post their performance results, especially online. There are many reasons for this, but poor performance is the primary one.

Simply posting our performance numbers is one area that sets us apart from other advisors. Posting our performance numbers “net of all fees” is another way in which we are unique. We post our portfolio performance numbers, net of all fees” on our website each month. That way an investor can see our actual net results generated on an ongoing basis.  

We updated our performance numbers  through July 30, 2008, on our website today.

Next time you think about investing, and hiring an investment advisor, look at their performance record, net of all fees, to see if it is “olympic” material.

photo by tico24

Why you shouldn’t choose a financial adviser simply based on trust.

For some reason, it has always been easier to lose money than it is to make it and keep it. According to the Utah Division of Securities, during 2007 alone, they filed enforcement action on 63 cases. Within those cases, 727 investors lost over $77 million dollars.

Managing your own investments can be done successfully, but it is not easy.

First, it requires a commitment of time researching and tracking your investments. Second, it requires discipline to stick with your strategy though challenging times. Third, and most difficult, it requires you to remove emotion from your investment process. 

Most successful people recognize the need for a relationship with an accountant and lawyer. Many haven’t yet discovered the benefits of working with a financial adviser. Based on the variety of investment options and the myriad of people that call themselves financial advisers, it is easy to understand why. Often figuring out who to work with is so confusing that people give up and opt to manage their money themselves.

Studies have shown that most investors would be better off with the help of a financial adviser. Unfortunately, finding the “right” advisor is much more difficult than most people realize. Most investors hire someone they “trust”. However, “trust” is very intangible and difficult to quantify. Also, contrary to popular belief, the size of the firm or familiarity of the brand name does not indicate the quality of the advice provided.

Part of the problem is that titles for financial sales reps are completely unregulated. This means that brokers, annuity salesmen and insurance agents are all free to call themselves advisers, financial consultants, financial planners or whatever else they prefer.

To make sure you don’t get stuck with a salesperson when you are really looking for an adviser, make sure you ask these five questions:

Fiduciary?

Fiduciary advisers have a legal obligation to put your interests ahead of their own. Sales reps selling insurance, mutual funds or other financial products are most likely not fiduciaries. A minority of all financial advisers actually meet the fiduciary requirement. Registered Investment Advisers and Investment Adviser Representatives are fiduciaries. 

 Experience?

How many years have they been managing money? Markets are difficult to navigate and constantly changing. Ideally, your adviser has experience investing in both good markets and bad markets. In the final analysis, you are paying an adviser for their experience.

 Track record?

Legitimate advisers will be able to show you a clear report of what they’ve done for their clients over the years. Showing you the track record of a mutual fund, a hypothetical model, or anything else that they have recently started selling does not count. They need to show you their own track record which would be a composite of the results of their previous clients’ investments. Any adviser who refuses to show you at least a five year track record of their performance should be crossed off your list.

 Conflict of interest?

Many commission based salespeople are honest individuals. However, in the financial services industry, the worse the product the higher the commission. The easiest way to avoid those “bad products” and to eliminate potential conflicts of interest is to avoid salespeople who receive commissions. By working only with advisers who are paid through management fees and not commissions you can make sure their interests are aligned with yours.

Surrender charge?

If there is a surrender charge then that means there was a commission. If there is a commission then you are not dealing with a fiduciary adviser. You should be free to move your money out of an investment if you are dissatisfied. This means you should never own a product with a surrender charge.

As I mentioned at the beginning… It has always been easier to lose money than it is to make. Implementing these tips will help you keep your money and find a great adviser.

photo by kamoteu 

Where do you see yourself in five, 10 or 20 years?

Where do you see yourself financially in this time frame?

Do you want to pay off your house, be debt free, travel, etc.?

Most people don’t think about these things very often. They go from day to day without really thinking about their long-term plan. Retirement seems like it will never come, and since it is so far away, they don’t need to think about it.

You can begin planning and thinking about retirement at any age. Each person’s situation is different, but the earlier you can start planning for your retirement the better.

 As you start planning, you may have several questions such as:

The list of questions could go on and on and may seem overwhelming. However, there is a clear path towards retirement and Paragon Wealth Management can help.

The decisions you make prior to and during your retirement years are some of the most important decisions you will ever make. Paragon can help make those decisions easier.

photo by stopnlook

Sometimes people ask us what the difference is between money managers and financial planners. This is our typical answer:

Money Managers- usually have more training. They actually manage the assets such as a mutual fund or a hedge fund. They make investment decisions, build portfolios and creat investment strategies. If you need to meet with a money manager, it is best to talk with a Chartered Financial Analyst (CFA) because they have more training.

Financial Planners- this term is used very loosely. Almost anyone can call themselves a financial planner. They usually gather your information and then try to sell you products because their pay is based off of comissions. It is better to talk to a Certified Financial Planner (CFP) because they have more training.

At Paragon, we have money managers such as Nathan White CFA, who is our Chief Investment Officer. He actively manages our clients’ money and continuely finds ways to improve our investment strategies and investment processes.

Paragon’s money managers are not paid on commissions, and do not sell products. If you would like a financial plan, our money managers gather your information and give you a plan based on your personal goals and objectives without trying to sell you something you don’t need.

photo by emdot

There are several reasons why a person might need or benefit from investment services. Here are a few.

1. You don’t the time or interest to follow the stock market regularly to make your own trades.

 2. You don’t have the resources and investment information to make wise decisions to invest your money on your own.

3. You need help reaching specific financial goals, like paying for your children’s education or preparing for a comfortable retirement.

4. You’ve been putting your money in bank CD’s, and you are ready to do more with your money.

5. You want to put your money away for a few years and not worry about it, but you don’t have the expertise to do it yourself.

6. You want to take the emotion out of investing and let a professional handle it.

This list could go on, but these are some of the main reasons.